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PUBLICATIONS  OP  THE  VANDERBILT  SOUTHEEN 
HISTORY  SOCIETY. 


Na   3. 


THE  CREDIT  SYSTEM  AND  THE 
PUBLIC  DOMAIN. 


(;.    1\    KMEKICK,   Pii.L).. 

! \anderbili  i  n ii'ii -s it\ 


NASHVILLE,  TENN.  : 

CrMBHKi.AM*  Presbyterian  PuBj^iSHiNGlfeuaE. 

1899. 


ivLIBRAKTr 

VANDERBILT 
UNIVOJSITY 


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no-  3 


eXCHANGE 


PUBLICATIONS  OF  THE  YANDERBILT  SOUTHEEN 
HISTORY  SOCIETY. 


No.   3. 


THE  CREDIT  SYSTEM  AND  THE 
PUBLIC  DOMAIN. 


C.  F.  EMERICK.  Ph.D., 

Instructor  in  Economics-^  Vanderbilt  Lhiiversity 


NASHVILI.E,  TENN.  : 

Cumberland  Presbyterian  Publishing  House. 

1899. 


2  ^^      :;  .^^  <-^ke^Cf^dii  Sy^^^^n  and  the  Public  Domain. 

home  in  large  part  out  of  the  returns  of  his  labor.  But  that 
credit  was  less  suited  to  a  government  selling  land  to  its  sub- 
jects than  to  the  business  transactions  of  everyday  life  appears 
to  have  occurred  to  only  a  few/ 

The  actual  working  of  the  system  soon  revealed  its  defects. 
This  is  disclosed  by  the  following  table  :  ^ 


Year. 


Acres  Sold. 


Due  from  Indi- 
viduals. 


Arrearage. 


1803 

199,080 

$1,092,390.17 

$40,218.35 

1804 

373.611 

1,434,212.50 

176,778.02 

1805 

619,266 

2,094,305.85 

384,799.11 

1806 

473.211 

2,245,557-58 

243.933-18 

1807 

358.372 

2,265,219.92 

315.312.12 

1808 

213.472 

2,180,425.86 

586,817.05 

1809 

231,044 

2,186,186.71 

886,841.92 

I8I0 

235,879 

2,036,837.37 

702,557.91 

I8II 

288.930 

1,970,912.91 

656,603.64 

These  figures  indicate  the  rapid  evolution  of  a  debtor  class 
upon  the  public  domain.  From  1803  to  1805  the  debt  almost 
doubled.  More  noteworthy  is  the  remarkable  growth  of  arrear- 
ages.    In  1809  these  were  Iwenty-two  times  greater  than  in  1803. 

Note. — The  above  table  covers  sales  south  as  well  as  north  of  the 
Ohio  river.  There  were  none  of  the  former  till  1803.  In  that  year  land 
offices  were  opened  in  Mississippi  Territory,  but  no  statement  of  sales 
appears  to  have  been  made  iill  1807.3  The  figures  for  that  year  include 
all  sales  since  the  opening  of  the  land  offices.  The  principal  facts  are 
ao  follows  :  '* 


Year.     Acres  Sold. 


Due  from  Indi- 
viduals. 


Arrearage. 


1807 

74.192 

$111,9/3.50 

1808 

17,892 

138,752.85 

1809 

87,635 

273,482.85 

$  36,166.88 

1810 

77,035 

390,195-33 

80,413.13 

I8II 

81,913 

474,541.23 

148,190.72 

'Annals  of  Congress,  1789-'91,  cols.  1069,  1070;  ibid.,  1796-'97,  cols. 
2209,  2210. 

=  American  State  Papers,  Finance,  Vol.  II.,  pp.  52,  53,  151,  152,  147, 
148,  210,  211,  252,  253,  313,  314,  315,  379-82,  445,  446,  502,  £03 ;  Public 
I^ands,  Vol.  I.,  p.  909. 

^Annals  of  Congress,  1802-1803,  Appendix,  col.  1594. 

*  American  State  Papers,  Finance,  Vol.  II.,  pp.  253,  315,  381,  382,  446, 
503. 


The  Credit  System  and  the  Public  Domain.  -^ 

The  movement  is  subject  to  fluctuations,  but  the  general  trend 
is  unmistakable.  The  amount  due  and  the  arrearage  are  doubt- 
less connected  with  the  yearly  acreage  sold.  Thus  the  great  in 
crease  in  sales  ending  with  1807  resulted  in  an  enormous  growth 
in  both  of  these  items  ;  likewise  the  falling  off  in  sales  following 
that  year  resulted  in  their  decline.  Much  the  greater  part  of  the 
debt  overdue  rested  upon  those  who  who  were  hopelessly  in- 
volved^ Nearly  three-fourths  of  the  arrearage  in  Ohio  in  1805 
was  due  from  those  who  had  paid  but  one  instalment."  The 
number  of  tracts  in  the  same  State  annually  offered  for  sale  on 
account  of  failure  in  payment  was  estimated  in  1812  at  1,020.3  The 
forfeitures  accruing  to  the  United  States,  July  i,  1813  to  Sept. 
30,  1814,  amounted  to  $23,589.33.  In  the  greater  number  of 
cases  this  loss  fell  upon  purchasers  of  a  quarter  rather  than  of  a 
half  or  whole  section.* 

The  credit  system  was  earl}^  recognized  as  ill  advised.  In  1797 
a  motion  extending  the  time  of  credit  from  one  to  four  years 
was  defeated  in  the  House  Committee  of  the  Whole  ^  The  op- 
position argued  that  "  nothing  more  would  be  received  of  the 
purchasers  than  the  first  deposit,  if  so  long  a  credit  were 
given"  ;  ^  and  that  *'  instead  of  money  the}^  should  have  petitions 
sent  in  for  a  prolonging  of  the  time  of  payment." '  Though  a 
supporter  of  this  motion,  Gallatin  in  1804/  1806,'  and  1808'°  rec- 
ommended the  abolition  of  the  credit  system.  The  House  Com- 
mittee on  Public  Lands  in  1806,"  1809,"  and  1812'^  made  a  simi- 
lar recommendation,  and  the  Senate  Committee  in  1812"*  ex- 
pressed the  same  opinion.  The  dealings  of  debtor  and  creditor 
with  each  other  are  subject  to  more  or  less  friction,  and  for  the 
relationship  of  government  and  subject  to  be  subjected  to  such 
a  strain  was  soon  perceived  to  be  eminently  unwise.  Any  gov- 
ernment in  becoming  indebted  to  large  numbers  of  its  own  sub- 
jects strengthens  itself  by  the  ties  of  self-intere.st.  Reverse  the 
case  and  the  fealty  of  the  average  citizen  is  weakened. '^     In  1806 


'  Ibid.,  Public  Lands,  Vol.  I.,  p.  287;  Vol.  II.,  pp.  730,  731. 
^bid.,  Vol.  I.,  p.  287.     3  ibid.,  Vol.  II.,  p.  441.     *Ibid.,  Vol.  II.,  p.  891. 
5  Annals  of  Congress,  l796-'97,  col.  2209.     ^  Ibid.     "  Ibid. 
^American  State  Papers,  Public  Lands,  Vol.  I.,  p.  183. 
9  Ibid. ,  p.  287.     -^  Ibid. ,  p.  910.     "  Ibid. ,  pp.  286-'7.     '^  Ibid. ,  pp.  909-'  10. 
•3 Ibid.,  Vol.  II.,  pp.  730-'31.     '-(Ibid.,  pp.  439-'41. 

'5Niles'  Register,  Vol.  XVII.,  1820,  p.  11;  see  also  Annals  of  Con- 
gress, 1796-'97,  col.  2209,  and  1819-'20,  cols.  445,  447,  1820,  1872-'77. 


y^.  The  Credit  System  and  the  Piiblic  Domain. 

Gallatin  said  :  **  The  accumulation  of  a  debt  *  *  *  which  is  every- 
day increasing  in  amount  and  extending  to  a  greater  number  of 
persons  may  ultimately  create  *  *  *  a  powerful  interest  hostile 
to  the  Federal  Government."^  More  than  two  thousand  heads 
of  families  in  Ohio  were  public  land  debtors  in  1805.^  The  num- 
ber in  all  the  States  and  Territories  in  181 2  was  seven  to  ten 
thousand.^ 

The  act  of  18044  endeavored  to  check  the  rapidly  growing  evil 
•of  delinquencies  by  exempting  payments  from  interest  if  made 
when  due ;  s  otherwise  interest  was  to  be  charged  from  the  date 
•of  purchase.  How  inadequate  this  remedy  proved  is  shown  by 
'the  table  given  above. 

In  1809  Congress  began  to  pass  various  act  of  relief  extending 
the  time  of  payment.^  With  few  exceptions  these  applied  only 
to  persons  holding  640  acres  or  less — an  attempt  to  favor  the 
settler  as  opposed  to  the  speculator.^  Such  measures,  however, 
wei%  mere  palliatives.  Leaving  the  credit  system  still  intact, 
they  did  not  remove  the  cause  of  the  disease.  Rather  did  they 
aggravate  the  difficulty  by  encouraging  the  opinion  that  govern- 
ment was  a  lenient  creditor  in  enforcing  its  demands.  That  they 
afforded  relief  to  some  is  not  denied,  but  in  so  doing  they  inten- 
sified the  trouble  they  were  devised  to  alleviate.  By  holding  out 
to  venturesome  spirits  the  hope  of  gain,  coupled  with  a  guaran- 
tee against  loss,  they  put  a  premium  upon  the  spread  of  the 
credit  system.  As  a  consequence,  it  extended  more  and  more 
over  Ohio,  Indiana,  Illinois,  Missouri,  Alabama,  Mississippi, 
Louisiana,  and  Michigan.^ 

Nor  was  this  experience  of  the  national  government  excep- 
tional. The  land  debt  south  of  the  French  Broad  and  Holston 
in  Tennessee  was  a  source  of  annoyance  to  the  State  for  twenty 
years:'  The  expense  of  legislating  upon  petitions  for  relief  by 
1833  exceeded  the  amount  still  due.'=    The  experience  of  Ken- 


^  American  State  Papers,  Public  Ivands,  Vol.  I.,  p.  287.     ^Ibid. 

3 Ibid.,  Vol.  II.,  p.  440.     4  Annals  of  Congress,  1803-'04,  col.  1290. 

^American  State  Papers,  Public  I^ands,  Vol.  I.,  p.  909;  Vol.  II.,  p. 
256. 

^Donaldson,  The  Public  Domain,  p.  205  ;  Annals  of  Congress,  1820, 
.cols.  1869,  1891. 

7  Donaldson,  op.  cit.,  p.  205.     ^Ibid. 

9  Senate  Journal,  Tennessee,  1829,  p.  103. 

^°  House  Journal,  Tennessee,  1833-'34,  p.  11. 


The  Credit  System  and  the  Public  Domain.  5 

tucky  in  exploitino^  her  public  domain  is  even  more  to  the  point. 
In  this  State  relief  was  granted  again  and  again  until  it  came  to 
be  expected  almost  as  a  matter  of  course.  In  the  Green  river 
country  any  one  opposed  to  such  a  measure  stood  but  little  chance 
of  election  to  the  legislature.  The  influence  of  the  debt  also  ex- 
tended to  other  legislation.  The  votes  necessary  to  enact  meas- 
ures that  otherwise  would  have  failed  were  procured  in  exchange 
for  votes  granting  indulgence  to  land  debtors.  Legislation  thus 
tended  to  become  a  matter  of  bargain  and  sale  rather  than  of 
public  policy.' 

Whenever  government  ceases  to  act  as  the  arbiter  of  diflfer- 
ences,  and  permits  itself  to  become  a  party  to  them,  it  inevita- 
bly compromises  the  dignity  of  its  position.  The  limited  means 
of  many  to  whom  credit  was  extended  ^  made  this  especially  true 
in  the  sale  of  the  public  lands.  The  House  Committee  on  the 
subject,  in  1806,  said  :  "Although  no  sales  have  yet  taken  place, 
there  is  no  doubt  but  some  must  be  made,  or  the  lands  revest  to 
the  United  States,  if  the  law  is  rigidly  executed.  *  ^  ^  it  ap- 
pears doubtful  whether  ^  ^  ^  an  attempt  to  sell  would  be  at- 
tended with  success.  *  ^  ^  Few  men  are  willing  to  incur  the 
resentment  of  their  neighbors,  by  bidding  for  their  prop- 
erty at  a  public  vendue,  even  when  other  neighbors  are  the 
creditors ;  and,  when  the  public  is  concerned,  scarcely  a  man 
will  be  found  hardy  enough  to  do  it.  The  lands  will,  therefore, 
in  many  instances,  revert  to  the  government,  encumbered  by  the 
occupancy  of  a  tenant  who  ought  to  be  evicted  before  another 
sale  should  be  made.  It  might  be  added  that  few  strangers 
would  run  the  risk  of  bidding  for  property  at  a  vendue,  when 
the  united  interest  of  the  whole  neighborhood  was  opposed  ta 
the  sale."  3  In  1812  the  Senate  Committee  observed:  "There 
can  scarcely  be  imagined  a  situation  better  calculated  to  rouse 
the  feelings  or  mislead  the  mind  of  an  individual  whose  hopes 
have  been  blasted  in  a  purchase  of  land.  He  has  made  his  pur- 
chase, and  with  difficulty  paid  his  first  instalment.  *  *  *  The 
credit  allowed  by  law  (five  years)  expires ;  his  land  is  adver- 
tised for  sale;  he  is  threatened  with  the  loss  of  all  he  has 
paid,  whether  one.  two,  or  three  instalments.  But  this  is  not 
all ;  his  labor  for  five  years,  which  has  put  his  land  in  a  state  of 


'  Annals  of  Congress,  1819-'20,  col.  447;  ibid.,  1820,  col.  1875. 
=  Flint,  Recollections  of  the  Last  Ten  Years,  1826,  pp.  40,  41. 
3  American  State  Papers,  Public  Lauds,  Vol.  I.,  pp.  236,  287. 


-6  The  Credit  System  and  the  Public  Domain. 

cultivation,  and  placed  around  him  the  comforts  of  life  where  a- 
wilderness  existed  before,  is  also  to  be  lost,  and  his  family 
turned  out  of  a  home  to  seek  some  new  situation." ' 

The  year  1814  witnessed  the  beginning  of  a  great  increase  in 
the  sales  of  the  public  lands.  In  that  year  864,536  acres  were 
sold,  or  245,370  more  than  in  any  year  since  1796.  During  the 
succeeding  five  years  the  sales  assumed  vast  proportions,  in  18 19 
reaching  5,475,648  acres.^  These  figures  were  not  surpassed  till 
1835.3  Still  more  noteworthy  was  the  increase  in  the  purchase 
money  offered.  During  the  thirteen  years  ending  with  18 13,  this 
averaged  $735,292.  In  18 14  it  leaped  to  $1,784,560,  forty-four 
per  cent  more  than  in  any  year  preceding.  Within  the  next 
four  years  it  twice  doubled,  and  in  1819  jumped  to  $17,681,794. 
Moreover,  in  1818  and  '19  there  was  a  marked  increase  in  the 
average  price  offered  per  acre.  In  no  year  prior  to  this  had  it 
reached  $2.40,  but  during  these  years  it  rose  to  $3.16.  More 
than  two-thirds  of  the  public  land  disposed  of  till  June  30,  1820, 
was  sold  during  the  six  years  ending  with  1819  ;  and  more  than 
three-fourths  of  all  purchase  money  off"ered  was  for  this  land.* 
The  most  remarkable  increase  took  place  in  Alabama  and  Mis- 
sissippi. In  these  States  the  sales,  i8i6-'iq,  averaged  1,000,000 
:acres,  fifteen  times  the  average  from  1807-16.  Of  $17,656,549 
purchase  money,  ninety-seven  per  cent  was  for  sales  during  the 
four  years  prior  to  1820.  The  average  price  per  acre  for  18 18 
:and  '19  was  $4.51.5 

The  land  office  at  Huntsville,  Ala.,  Was  the  center  of  most 
reckless  land  speculation.  The  lands  sold  at  that  office,  January 
I,  to  September  30,  1818,  averaged  $7.78,  and  for  the  year  ending 
September  30,  18 19,  $6.16  per  acre.^  Sales  at  ten  to  twenty  dollars 
per  acre  were  common  ;  at  twenty-five  to  thirty  dollars,  somewhat 
less   common,?   and   occasionally  as  high  as  seventy,^  seventy - 


'Ibid.,  Vol.  II.,  p.  440. 

^bid.,  Vol.  VIII.,  p.  2. 

3  Iceport  of  Commissioner  of  General  Land  Oflfice,  1841,  p.  22. 

^American  State  Papers,  Public  Lands,  Vol.  VIII.,  p.  2. 

5 Ibid.,  Vol.  III.,  p.  420. 

''Ibid.,  Finance,  Vol.  III.,  pp.  287,  432;  Public  Lands,  Vol.  V.,  pp. 
^77,  383-385. 

7  American  State  Papers,  Public  Lands,  Vol.  III.,  pp.  555-558;  Vol. 
JV.,  p.  805 ;  Niles'  Register,  Vol.  XI.,  1816,  p.  107. 

^Niles'  Register,  Vol.  XIII.,  1817,  p.  62. 


The  Credit  Sy stein  a7id  the  Public  Domain.  7 

eight,'  and  even  one  hundred  and  twenty  dollars^  were  bid. 
In  one  instance  a  planter  bought  a  quarter-section  of  cotton 
land  at  one  hundred  and  twenty-seven  dollars  per  acre.^  Spec- 
ulation in  town  sites  and  lots  was  of  the  wildest  kind.  A  com- 
pany paid  two  hundred  and  fifty-one  dollars  an  acre  for  a  half- 
quarter-section.  As  much  as  $3,500  w^ere  bid  for  one  lot.*  In  a 
memorial  to  Congress  m  1830,  the  general  assembly  of  Alabama 
said:  "In  the  years  1818,  1819,  and  1820,  ^  ^  ^^  competition  for 
Alabama  lands  was  without  a  parallel.  Sales  w^ere  made  at 
prices  so  far  above  the  true  value  of  the  lands,  or  above  that 
value  at  which  they  had  been  estimated  by  reasonable  men,  that 
the  people  of  the  surrounding  country,  not  engaged  in  the  trans- 
actions of  the  day,  attributed  it  to  a  frenzy  among  the  bidders. 
Good  lands  were  then  bid  ofif  at  prices  varying  from  thirty  to 
fifty  dollars  per  acre,  when  lands  of  the  like  quality,  equally 
productive  and  suitable  for  cultivation,  could  be  purchased  in 
the  neighboring  States  at  or  about  one-fourth  part  of  what  it 
was  agreed  to  be  paid  for  them  in  Alabama."  5 

St.  Charles,  Missouri,  witnessed  a  similar  experience.  "A 
very  large  tract  of  land  was  cried  for  sale  ^  *  *  and  the  only 
limits  and  bounds  given  were,  that  it  was  thirty  miles  north  of 
St.  Louis.  *  *  ^  But  a  purchaser  soon  appeared,  who  bid  ofif 
the  tract.  *  *  ^  There  were  people  who  offered  immense  tracts 
of  land  the  titles  to  which  were  contingent.  ^  ^''  *  Often  the  same 
tract  was  offered  for  sale  by  two  and  even  three  claimants.  The 
whole  county  of  St.  Charles,  containing  a  number  of  thousands 
of  inhabitants,  was  ofi"ered  for  sale,  by  wdiat  was  called  the 
Glamorgan  claim,  and  thirteen  hundred  dollars  were  paid  [for 
it]  on  the  spot."  ' 

In  addition  to  credit,  high  prices  for  produce,  profuse  emis- 
sions of  banknotes,^  the  Yazoo  land  scrip,  emigration  to  the 
West,  and  the  auction  system,  contributed  to  this  mania  for 
speculation.       Cotton    sold    from    twenty   to  thirty   cents    per 


'  Annals  of  Congress,  1819-'20,  col.  446. 

abid.,  Vol.  XV.,  1818,  p.  116. 

^McMaster,  History  of  the  People  of  the  United  States,  Vol.  IV., 
p.  396.     -^Ibid. 

5  American  State  Papers,  Public  I^ands,  Vol.  VI.,  pp.  142,  143. 

^  Flint,  Recollections  of  the  Last  Ten  Years,  1826,  p.  199. 

7  American  State  Papers,  Public  Lands,  Vol.  IV.,  p.  805;  Vol.  V.,  p. 
377;  Vol.  VI.,  p.  10. 


8  The  Credit  System  and  the  Public  Domain. 

pound.'     The    prices    of   tobacco    and    breadstuffs    were   also 
high." 

During  and  immediately  after  the  war  of  1812,  the  notes  of 
banks  receiving  and  reissuing  treasury  notes  were  accepted  in 
payment  of  all  public  dues.  This  promoted  excessive  is- 
sues.^ Besides,  payment  for  public  land  was  a  constant  drain 
upon  the  money  of  the  West,  and  the  temptation  to  fill  the 
vacuum  with  over  issues  was  strong. *  The  bills  of  many  local 
banks  made  a  place  for  themselves  by  depreciating  and  driving 
from  general  circulation  the  notes  of  specie-paying  institutions.^ 
The  years  i8i5-'iq  were  prolific  in  banks.  A  petition  to  Congress 
of  Alabama  land  debtors  alluded  to  the  recent  establishment  of 
seventy  new  banks.^  In  18 15  and  '17  no  less  than  twelve 
banks  of  issue  were  established  in  Tennessee.^  The  legisla- 
ture of  Kentucky,  at  the  session  of  181 7-' 18,  chartered  forty 
banks,^  and  in  1820,  as  a  relief  measure  for  their  victims, 
established  the  Bank  of  the  Commonwealth  of  Kentucky.' 
Banks  were  established  on  a  sum  of  money  sufficient  to  pay 
for  engraving  the  plates  and  to  purchase  the  paper  for  notes. 
The  Secretary  of  the  Treasury,  W.  H.  Crawford,  in  1820  said : 
"  Banks  have  been  incorporated,  not  because  there  was  capital 
seeking  investment ;  not  because  the  places  where  they  were 
established  had  commerce  and  manufactures  which  required 
their  fostering  aid;  but  because  men  without  active  capital 
wanted  the  means  of  obtaining  loans,  which  their  standing  in 
the  community  would  not  command  from  banks  and  individ- 
uals having  real  capital  and  established  credit.'""  The  note  cir- 
culation of  the  country  increased  from  forty-five  million  dollars, 
in  1812,  to  one  hundred  million  dollars  in  1817."     To  get  their 


•Ibid.,  Vol.  v.,  pp.  377,  378;  Vol.  VI.,  p.  10;  Atinals  of  Congress, 
1819-20,  col.  446 

^Niles'  Register,  Vol.  XVI.,  1819,  p.  386. 

3  Annals  of  Congress,  1819-'20,  col.  465;  ibid.,  1820,  col.  1892. 

*Ibid.,  1820,  col.  1885. 

5  American  State  Papers,  Finance,  Vol.  III.,  p.  263. 

<*Ibid.,  Public  I^ands,  Vol.  IV.,  p.  805  ;  Annals  of  Congress,  1819-'20, 
col.  446. 

7  Phelan,  History  of  Tennessee,  p.  259. 

^  Sumner,  Andrew  Jackson,  p.  120. 

9 Ibid.,  p.  124. 

'"American  State  Papers,  Finance,  Vol.  III.,  p.  494. 

"  Sumner,  History  of  American  Currency,  p.  80. 


The  Credit  Sy^te7?i  and  the  Public  Domain.  9 

notes  into  circulation,  the  banks  competed  in  offering  borrowers 
favorable  terms.  As  a  consequence,  the  use  of  credit  was  great- 
ly extended '  and  an  upward  impetus  was  given  to  prices.  This 
in  turn  encouraged  all  to  get  into  debt,  and  sharpened  the  pub- 
lic appetite  for  still  further  issues  of  bank  notes.= 

The  scrip  issued  in  settlement  of  the  Yazoo  claims,  was  re- 
ceivable in  payment  for  Alabama  and  Mississippi  lands.3  This 
increased  the  rage  for  land  speculation.^  Of  $4,691,784.38  re- 
ceived for  Alabama  lands  during  the  four  and  half  years  pre- 
ceding June  30,  1820,  $2,100,892.44 — forty-four  and  seven  tenths 
per  cent — were  Yazoo  land  scrip.= 

The  volume  of  western  emigration  ebbed  and  flowed  with 
prosperit\^  in  the  older  States.  Indian  uprisings  on  the  frontier 
sometimes  checked  its  flow ;  but  it  always  regained  its  ground, 
and  at  times  the  highways  wxre  thronged  with  families  moving 
to  the  west.''  The  movement  was  the  outgrowth  of  a  nation 
seeking  its  economic  ends  along  the  line  of  least  resistance.  Oc- 
casionally it  became  so  vast  as  to  alarm  the  Atlantic  states.  In 
1815.  a  legislative  committee,  in  a  report  to  the  legislature  of  North 
Carolina,  said  :  "  Within  twenty-five  \'ears  past,  more  than  two 
hundred  thousand  of  our  inhabitants  have  removed  to  the  waters 
of  the  Ohio,  Tennessee,  and  Mobile ;  and  it  is  mortifying  to  wit- 
ness the  fact,  that  thousands  of  our  wealthy  and  respectable  citi- 
zens are  annually  moving  to  the  west  ^  ^  *  and  that  thousands 
of  our  poorer  citizens  follow  them. "7  The  following  year  a  similar 
view  was  expressed  in  a  report  to  the  Virginia  House  of  Dele- 
gates.^ During  i8io-'20  the  population  of  the  public  domain 
states  and  territories  increased  from  671,804  to  1,653,147  ;  nearly 
tw^o  and  one  half  times.  The  more  noteworthy  increases  were  : 
Ohio,  230,760  to  581,434;  Indiana,  24,520  to  147,178;  Illinois,  12,- 
282  to  55,211;  Missouri,  20,845  to  66586;  Mississippi  and  Ala- 


^  American  State  Papers,  Public  Lands,  Vol.  VT.,  p.  12. 

^Sumner,  Andrew  Jackson,  p.  121. 

3  American  State  Papers,  Public  Lands,  Vol.  II.,  pp.  877-'87;  Hildreth, 
History  of  the  United  States,  Vol.  IV.,  pp.  227,  582,  642;  Vol.  V.,  pp. 
474-'5,  541-'2;  Vol,  VI.,  pp.  48,  464  ;  McMaster,  History  of  the  People  of 
the  United  States,  Vol.  III.,  pp.  131-'2, 

-♦American  State  Papers,  Public  Lands,  Vol.  IV.,  p,  805  ;  Vol.  V.,  p. 
377  ;  Vol,  VI.,  pp.  10,  12,  52  ;  Annals  of  Congress,  1819-'20,  col.  44b. 

5  American  State  Papers,  Public  Lands,  Vol,  V.,  p,  385, 

*  McMaster,  op,  cit,,  Vol,  IV,,  pp.  381-'8. 

7Niles'  Register,  Vol,  IX,,  1816,  Supplement,  p,  165,     ^bid,,  p.  150. 


lo  The  Credit  System  and  the  Public  Dotnain. 

bama,  40,352  to  203,349;  Louisiana,  76,556  to  153,407;  Tennes- 
see, 261,727  to  422,813/  As  a  consequence,  in  the  decade  end- 
ing with  1820,  seven  states — Louisiana,  Indiana,  Mississippi,  Ill- 
inois, Alabama,  Maine  and  Missouri — entered  the  Union. ^  In 
no  decennial  period  before  or  since  have  there  been  so  many  ac- 
cessions to  the  family  of  states. 

Lastly,  in  offering  the  public  lands  at  auction  to  the  highest 
bidder,  instead  of  at  a  fixed  price,  the  government  threw  wide  open 
the  door  to  speculation.  Competiiton  among  buyers  forced  the 
price  to  the  upmost  limit,  and  under  the  impulse  of  the  mo- 
ment men  made  the  most  extravagant  offers.  No  doubt  specu- 
lation would  have  seized  upon  the  land  in  any  event,  but  the 
auction  system  promoted  it  by  permitting  it  to  enter  so  early  in- 
to the  sales. 

The  seed  of  industrial  ruin  had  now  been  sown  and  the 
harvest  was  close  at  hand.  During  the  four  years  ending 
with  1818,  the  debt  due  from  individuals  for  public  lands 
had  increased  from  $3,042,613.89  to  $16,794,795.14.3  Failure  to 
meet  payments  became  so  common  that  the  receipts  were  prin- 
cipally confined  to  the  first  instalments  on  the  annual  sales.-* 
In  seven  years  ending  September  30,  18 18,  the  reversions  aggre- 
gated 698,336  acres,  ^  and  in  eighteen  years  the  forfeitures 
amounted  to  $402,855.75.^  Relief  acts  were  passed  almost  year- 
ly. Niles'  Register  said  :  "  The  statute  book  is  disgraced  by 
such  acts :  we  would  seriously  advise  the  passage  of  an  act  di- 
recting that  the  debtors  for  lands  should  satisfy  their  debts  sixty 
days  after  it  is  convenient."  ^  In  the  early  part  of  18 18,  the  Sec- 
retary of  the  Treasury,  in  self-defense,  instructed  collectors  and 
receivers  of  public  money  to  receive  nothing  in  payment  of  du- 
ties, taxes  and  public  lands  but  current  specie  and  bills  of  banks 
maintaining  specie  paj^ments.^  This  added  to  the  embarrassment 
of  the  land  debtors.^     Then  came  the  panic  of  1819.'°    Early  in 

^bid.,  Vol.  XXI.,  1822,  p.  346. 

"^  MacCouti's  Historical  Geography  of  the  United  States,  pp.  33-36. 

3  American  State  Papers,  Finance,  Vol.  III.,  p.  718. 

-*  American  StatePapers,  Public  Lands,  Vol.  III. ,  p.  419.     s  ibid. ,  p.  420 . 

nbid.,  Vol.  IV.,  p.  911.     7  Vol.  XXI.,  1821,  p.  277. 

^American  State  Papers,  Finance,  Vol.  III.,  p.  263;  Public  Lands, 
Vol.  IV.,  p.  2;  Niles'  Reg-ister,  Vol.  XIX.,  1820,  p.  48. 

9Niles'  Reg-ister,  Vol.  XV.,  1819,  p.  77;  Vol.  XIX.,  1821,  p.  132;  An- 
nals of  Congress,  1819  '20,  col.  465  ;  ibid.,  1820,  col.  1892. 

'°  Sumner,  History  of  American  Currency,  p.  79. 


The  Credit  System  and  the  Public  Soniain.  1 1 

that  year  ""the  price  of  all  articles  produced  in  the  western  states 
fell  so  low  as  scarcely  to  defray  the  expense  of  transportation 
to  the  ports  from  whence  they  were  usually  exported  to  the  for- 
eign markets.  This  condition  of  things,  which  had  not  been  an- 
ticipated when  the  debt  for  the  public  lands  was  contracted, 
produced  the  most  serious  distress  at  the  moment,  and  excited 
alarming  apprehensions  for  the  future."'  The  price  of  cotton  fell 
more  than  fifty  per  cent.^  Growers  endeavored  to  recoup  them- 
selves by  planting  a  larger  acreage,  but  this  only  drove  the  price 
still  lower  untiP  it  had  fallen  more  than  twenty  cents  per 
pound.*  In  Alabama,  where  cotton  was  the  sole  dependence  for 
cash,  this  meant  widespread  ruin.  "  Many  banks,  too  tedious  to 
mention,  [shut]  up  shop,  leaving  the  little  circle,  in  which  their 
notes  were  received,  in  a  state  of  itwiiderment  that  a  bank  should 
break.  .  .  .  Begotten  in  iniquity,  they  died  in  corruption."  ^ 
The  note  circulation  of  $100,000,000  in  18 17,  dwindled  to  $45,- 
000,000  in  1819.^  Prof.  Sumner  says:  "Stagnation  and  dis- 
tress lasted  throughout  1820.  Prices  were  at  the  lowest  ebb  and 
liquidation  w^ent  slowly  on.  Wheat  was  at  20  cents  per  bushel  in 
Kentucky.  A  man  in  Western  Virginia  stopped  Niles'  Register 
because  one  barrel  of  flour  used  to  pay  a  year's  subscription  ; 
now  three  bafrels  would  not.  At  Pittsburg,  flour  was  $1.00  per 
barrel  ;  boards  20  cents  per  hundred;  sheep,  $1.00." 7 

All  this  was  disastrous  to  land  debtors.  The  reversions  in  18 19 
amounted  to  365,020  acres — two  and  four  tenths  times  as  much 
as  in  any  year  preceding.*  In  addition  to  the  instalments  which 
fell  due  upon  sales  of  former  years,  the  amount  paid  into  the 
Treasury  lacked  $1,146,000  of  the  legal  minimum  payable  on  the 
land  sold  that  year.^  The  balance  due  in  1820  amounted  to  $21,- 
213. 350.17 ''  —  more  than  one-fifth  of  the  national  debt."     Fifty- 


'  American  State  Papers,  Finance,  Vol.  III.,  p.  718  ;  see  also  Flint, 
Recollections  of  the  Last  Ten  Years,  1826,  pp.  247-'8. 

^American  State  Papers,  Public  Lands,  Vol.  VI.,  p.  12  ;  Vol.  IV.,  p. 
805.      3  Ibid. ,  Vol.  VI. ,  p-  12.     ^  Ibid. ,  p.  10. 

5  Niles'  Reg-ister,  Vol.  XVIII.,  1820,  p.  364;  see  also  Flint,  Recollec- 
tions of  the  Last  Ten  Years,  1826,  p.  212. 

^Suuiner,  History  of  American  Currency,  p.  80.      "Ibid.,  p.  82. 

8 American  State  Papers,  Public  Lands,  Vol.  III.,  p.  420. 

9ibid.,  Vol.  Vin.,p.  2.     ^°Ibid.,  Vol.  IV.,  p.  795. 

"Public  Debt  of  the  United  States,  1791-18%,  Statistical  Bureau, 
Treasury  Department,  Feb.,  1897,  p.  1462. 


12  The  Cfedit  System  and  the  Public  Doynain. 

two  per  cent  of  this  vast  sum  rested  upon  Alabama  lands.'  This 
was  $8,500,000  in  excess  of  the  debt  for  the  same. number  of  acres 
in  other  States.'' 

The  time  was  now  ripe  for  action,  and  the  remedy  applied  by- 
Congress  was  two-fold  :  First,  the  repeal  of  the  credit  system  ; 
second,  provision  for  the  liquidation  of  the  debt.  The  latter 
without  the  former  would  have  aggravated  the  trouble.  The 
stock  argument  against  repeal  was,  that  without  credit,  men  of 
small  means  could  not  become  purchasers,  and  that  the  growth 
of  the  West  would  be  retarded.3  The  law  of  1820,  in  providing 
for  cash  sales,  met  this  by  so  reducing  the  price  per  acre  and  the 
minimum  tract  subject  to  purchase  that  whereas  $80.00  were  re- 
quired for  the  first  instalment  on  a  quarter  section,  one  hun- 
dred dollars  now  paid  in  full  for  eighty  acres.'*  This  measure 
passed  the  House  by  a  vote  of  one  hundred  and  thirty-three  to 
twenty-three  ;  and  in  the  Senate  only  seven  votes  out  of  a  total 
of  thirty-eight  were  cast  against  it.s  With  the  exception  of  one 
vote  in  the  Senate  and  seven  in  the  House,  the  opposition  to 
cash  sales  came  entirely  from  the  West.^  It  should  not  be  in- 
ferred, however,  that  the  Trans-Alleghany  States  were  a  unit 
for  the  credit  system,  as  they  really  gave  a  majority  of  one 
against  it.  Still  the  temper  of  western  sentiment  was  such  that 
its  representatives,  who  had  voted  for  cash  sales,  felt  called  up- 
on to  justify  their  course.? 

To  liquidate  the  debt  was  far  more  difiicult.  Nearly  a  dozens 
acts  were  passed  for  this  purpose.  The  first — that  of  1821 — of- 
fered three  plans  of  relief:  (i)  Relinquishment  of  a  part  of  one's 
purchase,  and  application  of  payments  made  thereon  to  that  re- 
tained. (2)  Payment  of  amount  due,  less  a  discount  of  thirty- 
seven  and  a  half  per  cent.  This  placed  the  public  land  debtors 
on  an  equality  with  purchasers  after  the  abolition  of  the  credit 
system.  At  that  time  the  minimum  price  per  acre  was  reduced 
from  two  dollars  to  one  dollar  and  twenty-five  cents.     (3)  The 


'American  State  Papers,  Public  Lands,  Vol.  IV.,  p.  795. 

=  Ibid.,  p.  805. 

3Niles'  Reg-ister,  Vol.  XVIII.,  1820,  p.  388  ;  Annals  of  Congress,  1820^ 
cols.  1878-'83.     ^Niles'  Register,  ibid. 

5  Annals  of  Congress,  1019-20,  col.  489;  ibid.,  1820,  col.  1901. 

<^  Annals  of  Congress,  1819-'20,  cols.  9,  10,  23,  448,  489,  700,  701,  726, 
and  ibid.,  1820,  col.  1901. 

7  Ibid,  1820,  cols.  1883,  1884. 


The  Credit  System  and  the  Public  Domain.  13 

privilege  of  a  further  credit.'  For  the  benefit  of  those  who 
failed  to  take  advantage  of  these  provisions  they  were  re  enacted 
in  1822,"  and  again  in  1823.^  Even  then  purchasers  of  126,933 
acres,  on  which  $103,806.58  had  been  paid,  were  unprovided 
for.-*  Within  seven  months,  or  by  September  30, 1821,  the  balance 
due  fell  to  $11.957,430.39^  — nearly  fifty  per  cent.  During  the 
following  year  there  was  a  further  decline  to  $10,572,378.61.^  This 
marked  encouraging  progress.  In  the  next  eighteen  months, 
however,  the  debt  decreased  but  $351,104.61.^  Moreover,  under 
the  act  of  1821,  further  credit  had  been  taken  on  3,588,558  acres 
upon  which  there  was  a  balance  due  of  $6,740,358.18.^  Ninety- 
two  per  cent  of  this  rested  on  land  upon  which  but  one-fourth  of 
the  purchase  money  had  been  paid.^  Such  a  heavy  indebtedness 
rendered  reversions  and  forfeitures  inevitable.  Some  further 
plan  of  liquidation  was  evidently  necessary.  This  was  the  pur- 
pose of  the  acts  of  1824'^  and  '26,"  which  enabled  those  who  had 
taken  an  extension  of  credit  to  complete  payment  by  either  ot 
the  plans  offered  in  182 1.  The  acts  of  1822  and  '23  had  done 
this,  but  they  did  not  require  the  relinquishment  of  enough  to 
enable  payment  to  be  made  in  full.  As  a  consequence,  the  debt 
declined  successively  to  $7,955,831.03,'''  December  31,  1825,  and 
$4,305,365.28,'^  September  30,  1827.  Still  liquidation  was  incom- 
plete. Besides,  in  the  eight  years  ending  with  1829,  687,384 
acres  further  credited  reverted,  and  $741,290.71  were  for- 
feited.'^ Seventy-five  per  cent  of  the  forfeitures  were  in  Ala- 
bama, and  eighty  per  cent  of  the  remainder  were  distributed 
about  equally  in  Ohio,  Indiana,  and  Illinois.'' 

It  was  apparent  that  further  legislation  was  needed,  and 
Congress  passed  the  acts  of  1830  and  1831.  These  applied 
to  lands  further  credited  which    had  reverted.     The  principal 


'  Annals  of  Congress,  1820-'21,  Appendix,  col.  1795  sq. 
=  Ibid.,  1822,   Appendix,   cols.  2591,  2592. 

3 Ibid.,  1822-'23,  Appendix,  col.  1408;  American  Slate  Papers,  Public 
Ivands,  Vol.  III.,  p.  641. 

4  American  State  Papers,  Public  Lands,  Vol.  IV.,  p.  770. 

5  Ibid.,  Vol.  III.,  p.  645.     ^bid.,  Vol.  IV.,  p.  795.     7  ibid. 
8 Ibid.,  Vol.  III.,  p.  630. 

9  Ibid. 

'°  Annals  of  Congress,  1824,  Appendix,  cols.    3219,3231,  3232. 
^'Ibid.,  1825-'26,  Appendix,  pp.  XII.,  XIII. 
=  American  State  Papers,  Public  Lands,  Vol.  IV.,  p.  911. 
Ibid.,  VoL  V.^  pp.  3,  802.     '*Ibid.,  Vol.  VI.,  p.  18.     '5 ibid. 


14  The  Credit  System  and  the  Public  Domain. 

feature  of  the  former  provided  for  liquidation  by  abatement. 
By  this  method  titles  were  completed  upon  payment  of  one 
dollar  and  twenty-five  cents  per  acre,  in  addition  to  that 
already  paid — the  total  not  to  exceed  $3.50  per  acre/  Purchas- 
ers of  high-priced  lands  were  the  chi^ef  beneficiaries  of  this  pro- 
vision/ The  act  of  1831,  therefore,  declared  purchasers  at  less 
than  $14,  "entitled  to  patents-^ in  all  instances  where  one  dollar 
and  twenty-five  cents,  or  a  greater  sum,  per  iacre,  shall  have  been 
paid  [or  where  payment  to  that  amount  shall  be  made]. "3  The 
act  of  1830  also  authorized  the  issuance  of  certificates  for  the 
amount  forfeited  on  reverted  lands,  which  had  sold  at  not  to  ex- 
ceed $2.50  per  acre.  These  were  receivable  in  payment  of  pub- 
lic lands.  The  act  of  1828  had  provided  for  this  in  all  cases 
where  further  credit  had  not  been  taken."^ 

To  sum  up  :  4,602,573  acres  were  relinquished  ;  ^  seventy  per 
cent  of  the  debt  was  liquidated  in  this  way ;  ^  fifteen  and  two- 
tenths  per  cent  by  cash  and  discounts;  ^  six  and  four-tenths  per 
cent  by  abatement ;  ^  and  the  remainder  in  one  or  another  of  the 
following  ways  :  (i)  cancellation  of  indebtedness  on  land  upon 
which  certificates  for  forfeitures  were  issued ;  (2)  cash  incidental 
to  abatement ;  (3)  cash  without  discount  on  instalments ;  9  (4)- 
reversions.'"  The  purchase  price  of  land  relinquished,  averaged 
higher  than  of  that  retained.  Under  the  laws  of  182 1,  '24and  '26 
the  prices  per  acre  respectively  were :  Three  dollars  and  fifty- 
four  cents,  and  three  dollars  and  eleven  cents ;  "  two  dollars  and 
ninety  cents,  and  two  dollars  and  fifty-three  cents  ;  "  three  dollars 
and  fourteen  cents,  and  two  dollars  and  thirty-four  cents. '^  The 
contrast  was  greatest  where  speculation  had  been  most  unre- 
strained. In  Alabama,  under  the  acts  of  1824  and  '26,  the  figures 
were :     Three  dollars  and  ninety-eight  cents,  and  three  dollars 


'  Congressional  Debates,  1829-30,  Appendix,  p.  XIII. 

="  American  State  Papers,  Public  I^ands,  Vol.  VI.,  p.  216. 

3  Congressional  Debates,  1830-31,  Appendix,  col.  17. 

*Ibid.,  1827-28,  Appendix,  p.  X-XIII.;  American  State  Papers,  Pub^ 
lie  Lands,  Vol.  V.,  p.  12. 

5  American  State  Papers,  Public  Lands,  Vol.  VI.,  p.  456. 

6 Ibid.,  and  Vol.  IV.,  p.  795. 

7  American  State  Papers,  Public  Lands,  Vol.  VI.,  p.  456,  and  VoL 
IV.,  p.  795. 

8 Ibid.     9 Ibid.,  Vol. VI.,  p.  11.     '° Ibid.,  Vol.  VI.,  pp.  18,  456. 

"Ibid.,  Vol.  III.,  p.  629  ;  Vol.  IV.,  p.  482. 

"Ibid.,  Vol.  IV.,  pp.  770,  794.     '3 ibid.,  Vol.  V.,  p.  3. 


The  Credit  System  and  the  Public  Domain.  15 

and  forty-one  cents  ; '  four  dollars  and  thirty-six  cents,  and  three 
dollars  and  twenty-eight  cents.=  The  government  sold  19,399,- 
158  acres  under  the  credit  system  for  $47,689,563.09,  but,  owing 
to  reversions  and  relinquishments,  parted  title  with  but  13,642,- 
536  acres,  for  which  $27,900,379.29  were  received. ^  The  system 
was  at  its  worst  in  Alabama:  of  3,999,245  acres  sold,  1,842,535 
were  relinquished— nearly  three  times  as  great  a  percentage  as 
in  other  states.*' 

The  above  pages  point  to  but  one  conclusion.  The  sale  of 
the  public  lands  on  credit  was  a  disastrous  failure.  It  intro- 
duced antagonistic  interests  between  government  and  subject. 
The  rapid  growth  of  the  debt,  and  especially  of  ihe  payments 
defaulted  upon,  soon  attracted  the  attention  of  thoughtful  ob- 
servers. It  engulfed  large  numbers  in  hopeless  debt  and  called 
for  the  repeated  intervention  of  the  government  to  save  men 
from  the  consequences  of  their  own  acts.  Laws  for  this  pur- 
pose were  in  force  during  nearly  half  the  life  time  of  the  credit 
system  ;  even  then  reversions  and  forfeitures  were  not  uncom- 
mon. Instead  of  subserving  the  interest  of  the  Treasury,  it 
yielded  the  government  an  annual  stream  of  uncollectable 
claims,  and  fully  twelve  years  were  required  to  clear  away  the 
wreckage  which  it  left  in  its  wake.  Of  all  the  states,  Alabama 
was  the  worst  sufferer. 

The  credit  system  also  promoted  the  wild  speculation  in  West- 
ern lands  which  preceded  the  panic  of  1819.  The  only  limit  to 
purchasers  which  it  imposed,  was  the  ability  to  make  the  first 
payment.  In  doing  this,  many  settlers  expended  their  last 
cent,  relying  upon  the  produce  of  their  industry  to  meet  instal- 
ments as  they  would  fall  due.5  Further,  credit  fired  the  imagi- 
nations of  men  and  led  them  to  offer  prices  greatly  in  excess  of 
cash  values.^  It  may  have  hastened  the  settlement  of  the  West, 
but  subsequent  history  has  shown  that  other  means,  fully  as 
effective  and  unattended  with  so  many  evils,  may  be  used  for 
this  purpose.  ^ 

No  doubt  the  sale  of  land  on  credit  would  have  worked  better 


'  Ibid.,  Vol.  IV.,  pp.  770,  794.     ^Ibid.,  Vol.  V.,  p.  3. 
3 Donaldson,  The  Public  Domain,  p.  203. 

*  American  State  Papers,  Public   Lands,  Vol.  V.,  p.  385:  Vol.  VI.,  p. 
456. 

3  American  State  Papers,  Public  Lands,  Vol.  II.,  p.  888. 
6  Annals  of  Congress,  1820,  col.  1880. 


i6  The  Credit  System  and  the  Public  Domain. 

if  conditions  had  been  other  than  they  were.  If  half  the  pur- 
chase money  in  place  of  one-fourth  had  been  required  in  cash  ; 
if  security  other  than  the  land  had  been  given;  or,  if  transportation 
had  been  less  primitive,  the  results  would  have  been  less  disas- 
trous. The  conclusion  seem  unavoidable,  however,  that  the 
system  itself  was  at  fault.  In  lecommending  its  repeal  in  1819, 
the  Senate  Committee  on  Public  Lands,  said :  "  It  cannot  be 
be  correct  policy  to  persist  in  the  continuation  of  a  system  so 
much  affected  by  circumstances  as  that  under  consideration, 
which  requires  the  frequent  aid  of  mitigating  expedients  to  pre- 
serve its  existence,  and  to  prevent  its  oppressive  effects  on  a 
considerable  portion  of  the  community.  ^  ^  >i^  Judging  from 
the  experience  of  the  past,  without  any  assurance  of  a  more 
favorable  state  of  things  in  the  future,  it  may  be  concluded  that 
the  system  of  credit  is  not  well  adapted  to  the  circumstances  of 
the  country,  and  will  be  injurious  so  long  as  commerce  is  liable 
to  fluctuation."^  C.  F.  Emerick. 


American  State  Papers,  Public  lyands,  Vol.  III.,  p.  413. 


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